Management information systems
All businesses need management information. For very small businesses with an uncomplicated structure, this can, of course, be very simple. A street busker needs to know little more than the value of the contents of his hat in order to have a good idea of how he is doing! As businesses get more complex, however, the need for collection of financial and other data, and its presentation in a useful and meaningful format, increases. An IT or management consultant, who provides only time for an agreed fee, appears to have, apart from the magnitude of the figures involved, a very similar business to the busker. Arguably, the contents of the bank account, rather than the hat, are the key indicator.
But what happens if the consultant is not paid until 30 or 60 days after the work is performed? Now, to get a meaningful measure, the contents of the bank account must be augmented by outstanding fees receivable. The complexity grows exponentially when staff are employed, stock is held, materials are purchased on deferred payment terms and equipment used in the business is acquired on HP. Any possibility of being able to measure performance informally is soon dissipated, even for small and medium-sized enterprises (SMEs). And measurement of performance, by the use of key indicators and their comparison with appropriate targets, is vital to management success.
The first step in the flow of management information is the recording of the raw data; in respect of financial transactions this is “book-keeping”. Other non-financial statistics such as marketing or staff performance indicators should, however, not be overlooked. We have a great deal of experience in the design and implementation of suitable systems of recording transactions and other raw data. This includes not only the choice of computer software, but also the design of document flow and storage systems and the training and support of personnel involved in the process. Achievement of a sound, reliable recording system is a prerequisite for good management information.
The next stage is to ensure that processes are in place to convert the raw data into useful management information; the financial part of this process is “management accounting”. Once again, the presentation of other useful statistics should not be overlooked. Even the busker might benefit from an analysis of which songs generated the most revenue, to help in choosing what to play to maximise income! This part of the process relies to a much greater extent on expert involvement. Depending upon the amount of a client’s in-house expertise, our involvement can range from undertaking the entire management accounting job, through support and regular but occasional reviews, to a very “light touch” when called upon.
Our experience is also invariably that the implementation of management information systems is an evolutionary process. Very often, management will be prompted by one report to ask for another, and the systems can be suitably modified. Data collection processes may need to be improved to achieve greater accuracy or further analysis. Certain reports may become superfluous and can be discarded; nothing should be produced merely because “we’ve always done it that way”. The business direction may change, resulting in new reporting requirements. Third parties such as investors or lenders may impose more stringent reporting requirements. It may even be necessary to gather additional statistics and prepare additional analyses to obtain certain tax incentives or grants. All these will test the flexibility that should be built into the management information systems.
Richardsons, with a wealth of experience of enterprises varying dramatically in their in-house capability, is ideally placed to help with the design and implementation of management information systems for just about any conceivable SME.